Real Estate terms making a comeback in today’s Market
Purchasing real estate in today’s challenging market has some terms not commonly used for some time. The challenge of getting funding has forced sellers and buyers to get creative to get a deal done. Let’s take a look at a short list to clarify of these terms for those first time home buyers.
-Installment contract= Property is purchased through installments with the title to the property being withheld until all installments are made. Usually done with a tax deferred incentive in mind, the gain from the sale is diminished by not receiving the proceeds in one lump sum. It can also benefit the buyer in that usually no down payment required.
-Lease with option to buy= This allows the renter or lessee to accumulate a down payment by applying a portion of the rent toward the down payment. The transaction needs to be structured in such a way that the IRS does not interpret the lease as an outright purchase (installment contract).
-Sale-leaseback= Seller sells property to a buyer who then leases the property back to the seller. This is done within the same transaction, usually with a full triple net lease that is set for a specific period of time.
-Contract for deed= Agreement of sale between the seller and buyer of property in which the payment either in full or a portion are deferred. The buyer takes possession of the property and receives equitable title to the property and pays the taxes including all costs associated with the maintenance of the property. The seller continues to hold title, and is responsible for any underlying mortgage payments. The seller is required to deliver good title at the end of the specified time period. Buyer receiving equitable title along with the obligation to purchase differentiate the Contract for deed from the Installment contract.
When utilizing any of these alternative methods of purchasing property it is best advised to retain the services of a reliable real estate attorney.
If you or family member are thinking of buying or selling a home please feel free to contact me for assistance.
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